Oil and gas operations: rights and obligations

Unfortunately, these resources have been identified as playing key roles in triggering conflicts, and, all through history, the struggle for possession and control of natural resources has been the remote, if not the immediate, cause of great wars and human tragedies. The significance of land as a natural resource to man cannot be overstressed. Land, though representing only about one-third of the earth’s surface, provides a platform on which man’s activities ranging from shelter, food, industrial activities and movement are carried out.
Nigeria has earned huge revenues from the vast oil resources, since the advent of oil in 1956. However, despite the huge revenues, Nigerians remains impoverished particularly in the Niger Delta. The impoverish state of the region has been attributed in the main, to negative impacts of oil activities on the environment and their deleterious impacts on traditional means of livelihoods. Thus, the impact of the land alienation through the Land Use Act has been given little attention. Nigeria has been bedeviled by conflict associated with the effects of natural resource exploitation for human livelihood, settlement and sustainability of the ecosystem.
This conflict is intrinsically related to structural conflict of groups and factional struggle for resource control, and the mobilization of state power by elite of the dominant ethnic group to advance intrinsic interests. ‘Whose land?’ The Land Use Act 1978 vests all land in each Sate on the Governor. This is the one question that underpins much of the conflict associated with the exploitation of ‘strategic’ natural resources such as petroleum, diamond, gold, timber in Sub-Saharan Africa.
It is presently at the center of crisis in the Niger Delta. It is thus imperative to examine the legal framework regulating oil operations in Nigeria and find out how these laws have shaped the relationship between the Federal Government and multinational oil companies on the one hand and the oil producing States/communities on the other. It is also the one issue that defines what communities and landowning groups receive by way of compensation for land expropriated for extractive industrial activities.
The differing stances between the State and stakeholder communities as to who has a legitimate claim to land and the minerals under it can become quite complicated. While the state believes it ‘owns’ the natural resources and, so, must determine how best the exploitation of such resources can bolster national development objectives, indigenous communities often attach more than economic definitions to land. Many indigenous communities regard forests not merely as ‘a collection of trees and the abode of animals but also, and more intrinsically, a sacred possession.
Legal Framework
On attainment of independence in 1960, the Federal Government was vested with the exclusive power to “legislate on mines and minerals, including oil fields, oil mining, geological surveys and natural gas in Nigeria.
The promulgation of the Petroleum Act of 1969 marked a watershed in the history of petroleum legislation in Nigeria. Its significance is that, among other things, it stipulated for the first time that the entire ownership and control of all petroleum in Nigeria is vested in the Federal Government of Nigeria. It also revised all the terms and conditions under which pre-1969 concessions were granted to Oil Companies. The Petroleum Act and its regulations remain the primary law regulating oil and gas exploratory activities in Nigeria.
The Act vested the entire ownership and control of oil and gas resources in, under or upon all land or territorial waters in the Nigerian government, and authorizes the Federal Ministry of Petroleum Resources to issue licenses to Nigerian citizens or companies incorporated in Nigeria for oil prospecting, drilling, production, storage, refining, and transportation activities. The Exclusive Economic Zone Act 1978 also vest on the Federal Government of Nigeria sovereign and exclusive rights with respect to the exploration and exploitation of the natural resources of the seabed, sub soil and superjacent waters of the EEZ.
The Constitution of the Federal Republic of Nigeria 1999, section 44(3), further vest the ownership and control of all minerals, mineral oils and natural gas in, under or upon any land in Nigeria, its territorial waters, and exclusive economic zone on the Federal Government, and the Federal Government is to manage such minerals in such manner as may be prescribed by the National Assembly. Thus the Constitution confers exclusive jurisdiction on the National Assembly on matters relating to oil, gas and other minerals.
This provision is an adoption of a series of statutory laws and regulations promulgated by the Federal Military Government between 1969 and 1990. The most important of these legislations include the Petroleum Act of 1969 as amended, Offshore Oil Revenue Act of 1971, Petroleum Profit Tax Act of 1959 as amended, Land Use Act of 1978 as amended, Oil Pipelines Act of 1978 as amended, Oil In Navigable Waters Act of 1979, Exclusive Economic Zone Act of 1978, Hydrocarbons Oil Refineries Act, the Petroleum Equalisation Fund Act of 1989, Associated Gas Re-Injection Act of 1979, Nigeria Liquefied Natural Gas Act of 1990, Oil Pipeline Regulations (Under the Oil Pipelines Act) of 1969, Petroleum (Drilling and Production) Regulations of 1969, and Petroleum Refining Regulations of 1969.
Provisions within the Oil Pipeline Act of 1956 (as amended, 1965, 2002, 2004) and the Petroleum Act of 1969 empowers the Nigerian Government to grant access and use rights in relation to land for the purposes of oil prospecting and mining. Once a company has been granted permit, license or lease, the State government has to give access to the land.
These laws have been one of the major sources of conflict between the host communities, the international oil companies (IOCs) and the Federal government, which have considerably impeded oil and gas production in the Country. The Federal Government with a view to mitigate the effect of these conflicts enacted several legislation such as the Oil Minerals Producing Areas Development Act 1992 which was repealed by the Niger Delta Development Commission Act 2000, the Allocation of Revenue (Abolition of Dichotomy in the Application of the Principle of Derivation) Act of 2004, Nigerian Oil and Gas Industry Content Development Act 2010 and others.
The combined effect of the Petroleum Act, the Territorial Waters Act, the Exclusive Economic Zone Act and the Land Use Act 1978 is to vest ownership and rights of exploitation of mineral and natural resources in the territorial waters, exclusive economic zone of Nigeria in the Federal Government of Nigeria
Ownership of Land
Prior to 1978, land tenure system in Nigeria was based on various systems of customary law. In the southern states of Nigeria, there was a dual system of land tenure, namely; customary land tenure system and land tenure system under the received English law. Under customary law, families and communities owned land, while under English law; the English legal concepts of individual ownership were recognized.
The situation was somewhat different in the Northern states where control and disposition of native’s land was vested on the colonial government. A significant turning point in the ownership of land in Nigeria was the promulgation of the Land Use Act in 1978.
The Land Use Act vested land comprised in the territory of each state in the Governors of the State and such land are to be held in trust and administered for the use and common benefit of all Nigerians. The Act reduced the individual interest in land that was hitherto an absolute ownership right to a mere right of occupancy. The local communities are compensated according to a formula that assesses value based on ‘surface goods’ lost. The compensation arrangements however, do not consider the long-term implications of loss of access to critical livelihood resources.
Also, the Land Use Act bars courts from addressing any concerns about the amount or adequacy of compensation paid to people who lose access to their land under the terms of the Act. Together, the constitutional provisions on oil and gas, the Land Use Act, the Oil Pipelines Act and aspects of the oil laws in Nigeria have empowered all the tiers of government to expropriate land for use by the oil industry without adequate compensation to the land owners in clear contravention of its International Human Rights Obligations (IHRO), particularly the right to adequate standard of living.
There are various theories of ownership which include
Absolute Ownership Theory
This theory states that the owner of a piece of land is regarded also as the owner of the petroleum lying underneath the land. Land in this regard includes everything down to the crux and up to the sky. In Nigeria, the absolute ownership by the states is the order of the day. This is clear from the provisions of Section 1 of the Petroleum Act, which provides that the entire property in Petroleum shall vest in the state. Thus mineral oil is absolutely owned, but by the state.
Qualified Interest Theory
This theory states that petroleum cannot be owned until it is captured and reduced into possession. Under this theory the land owner is said not to have title to the oil and gas in situ because of the fact that he can be divested by drainage without consent and without any liability on the part of the person causing the drainage.
The Non- Ownership Theory
This theory states that petroleum is not capable of ownership. Since petroleum is like a fluid that can move from one place to another it cannot be owned in the strict sense of the word. There is not much support for this theory as modern practice show that petroleum though may move from one place to the other but is still subject to ownership by the person or authority that captures it at any particular point in time.]]>